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GLOBAL PROTECTION FOR CANNABIS TRADEMARKS: REAL OR SMOKE AND MIRRORS?
Clark W. Lackert
Shareholder, Carlton Fields, S.A., New York
Copyright © 2019 Clark W. Lackert
Paris Convention for the Protection of Industrial Property of 1883, Article 7: “The nature of the goods to which a trademark is to be applied shall in no case form an obstacle to the registration of the mark.”
With the meteoric growth of the cannabis (hemp and marijuana) businesses, much has been written about the divergent treatment of trademarks for these products, as well as parallel routes of protection, in the United States. However, hemp products incorporating cannabidiol (CBD), which is not psychoactive, are gaining wider acceptance more quickly than marijuana products incorporating tetrahydrocannabinol (THC), which is psychoactive. Despite this varied treatment, these industries continue to grow globally. As addressed in the quote from the Paris Convention in the caption above, are there goods (and services) for which there can be no trademark registration or protection generally? What are the major issues, how has the international intellectual property system been coping with this explosion of new trademarks, and what does the future hold? This review will focus on CBD issues, but of course, there is overlap with THC issues.
- Current CBD Regulation
The United States Agricultural Improvement Act of 2018 (a/k/a “Farm Bill”) exempted certain hemp-based CBD products from the strict federal regulations on controlled substances and opened new consumer markets for CBD products such as hemp oil, cosmetics, and nutritional supplements. However, use of CBD in food, drug, and other products regulated by the FDA has prompted new administrative hearings on best practices for ongoing regulations concerning the sale, marketing, and classification of such CBD products. U.S. federal law currently prohibits labelling CBD as a “dietary supplement” or an ingredient that purportedly has positive health effects when added to foods. The FDA’s current position is that further scientific evidence may be needed before permitting the marketing of CBD as an ingredient tied to certain health benefits.
Abroad, European regulators also have adopted a similar approach, with the European Monitoring Centre for Drugs and Drug Addiction (EMCDDA) recently issuing a report calling for regulations on levels of CBD in food and drug products and the need for further research into actual health effects of CBD.
- Trademark Use versus Registration
To understand the global cannabis trademark state of play, we must first understand how the global trademark system works. The three ways trademark rights arise are through use, registration, and reputation/fame. With only the exception of the United States and possible a handful of other countries, use of a trademark is not required before registration, and even in these countries, if the trademark application is based on a treaty such as the Paris Convention or the Madrid Protocol, use is not required at all before registration. In so-called “British Law” countries in the U.K. Commonwealth, as well in the United States, you may need to allege a bona fide intention to use the mark as an alternative basis, but even in these countries, treaty-based applications may not require use. Thus, the primary objection to cannabis trademark registration in the United States, i.e., that there cannot be lawful use of a cannabis trademark since cannabis is a “controlled substance” at the federal level but not at every state level, (See USPTO Examination Guide 1-19, May 2, 2019), does not apply internationally.
However, the answer to the question as to whether the trademark owner can use and enforce the trademark in a particular jurisdiction is different. Since most countries have use requirements after registration, usually use within five (5) years after registration, a trademark owner’s registration may be vulnerable to third party attack for trademark “abandonment” if the trademark has not been used within the statutory period. In this instance, a third-party action for cancellation will be needed to invalidate the registration. Additionally, certain countries have requirements to affirmatively prove use of the trademark to maintain the registration either at renewal or use affidavit deadline stages, or to maintain rights generally. Here, the registration will be cancelled ex officio by the trademark office if such use is not provided. Although there may be a force majeure argument in certain scenarios, i.e., use is prohibited by law, this argument may not be persuasive in jurisdictions where the selling and use of cannabis products are illegal. However, the mere registration of a cannabis mark without any use creating a violation of any local controlled substance law seems problematic in many countries.
Apart from registration issues, the question arises as to whether a cannabis trademark can be used and enforced despite not being able to be registered (registration and use are often confused). Many countries acknowledge “common law rights”, i.e., rights arising directly out of use but not registration. In these countries, it may be possible to create trademark rights even though the local trademark office does not permit registration of cannabis trademarks per se. Of course, there may be restrictions on use in certain countries due to local regulatory (e.g., food and drug regulatory bodies such as the FDA in the US) and criminal laws, but a global trademark owner should not assume that such local use laws and local trademark office rules are always synchronized.
- Marketing and Advertising
As with all trademarks, marketing and advertising are essential features of establishing goodwill in the trademark and increasing a trademark’s scope of protection. In countries where use of the mark is prohibited, two of the most effective tools to build global goodwill in the mark will not be available. However, it may still be possible to build brand awareness within permitted product categories in countries where THC and/or CBD products remain restricted, and there may be hybrid approaches to overcome regulatory hurdles in countries where regulations are in flux.
As examples, best practices may involve the release of traditional products that do not contain THC and/or CBD in countries with more stringent regulations. Marketing and protection of trademarks in traditional product categories such as supplements, baked goods, and cosmetics may provide a placeholder for future release of companion products containing THC and/or CBD under the same trademark if ultimately permitted by these countries at a later date. In addition, hybrid approaches may be preferable for markets such as the United States and Europe. It may be advantageous to adopt varying approaches to product ingredients, marketing, and classification to: (i) establish and maintain protection and consumer awareness of a brand; and (ii) ensure that certain product lines can be tweaked to steer clear of the wide range of restrictions that could potentially be enacted by regulatory agencies.
- Financial Considerations
The issues relating to sales, taxes, funding, and other financial aspects of these industries are still in flux on a worldwide basis. Sales and other financial aspects of the business also will affect the footprint of related trademark protection. If cannabis trademarks cannot be registered in a global portfolio, the trademark owner’s rights to securitize the marks with financial institutions will be limited, as well the owner’s ability to list such marks as assets on a schedule in a corporate purchase or sale.
The Current Global Trademark Protection Approach
Brand protection in this evolving area is likely to require higher levels of investment than more traditional industries. This is not only due to the need to register and market broadly in multiple product categories and respond to evolving regulations concerning branding and labelling, but also due to the increasing number of illicit third-party activities that have recently been encountered by brand owners globally. As detailed below, varied systems of trademark protection may permit third parties to obtain priority in identical or similar trademarks based upon illegitimate objectives of holding the brand (and market) hostage until an agreed payment or other arrangement is reached with the legitimate brand owner. As such, it is critical that brand protection be approached in a systematic way by using trademark filing treaties as appropriate to maintain global priority. Moreover, protections in other regimes such as copyright, patent, trade dress, and design may be appropriate to ensure that the brand can be enforced against third parties that attempt to trade off of the goodwill or engage otherwise in deceptive practices or unfair competition. As examples, copyright registration may be used to combat counterfeit websites and misleading social media content, and trade dress or design rights may be used to enforce rights against third parties that may adopt unique aspects of a product line in an effort to falsely suggest an association or sponsorship. Moreover, this particular industry has been hard hit with multi-faceted infringement and counterfeiting, and counteracting such activity requires a multi-pronged approach.
- Direct Registration
For most trademark owners, direct registration of trademarks for the specific goods or services of interest is the best practice. Not only do so such registrations cover the core goods and services, but such registrations will be supported by use of the trademark on those goods and services when the time comes to satisfy use requirements. On the cannabis issue, the world is sharply divided. In some countries, such as China and the United States, registration of a corresponding trademark is explicitly forbidden since the underlying goods are deemed illegal (akin to Saudi Arabia prohibiting registration of alcohol trademarks in Class 33). On the other hand, countries such as Canada, Colombia and Mexico, and trading blocs such as the European Union, permit it. A middle ground can be found in Switzerland, where certain types of cannabis with lower levels of THC are allowed to be claimed in the covered goods, where cannabis with higher levels of THC are not. It remains to be seen whether use of a confusingly similar mark on a different type of cannabis (e.g., hemp ó marijuana) could be considered an infringement, but at the very least, such related registrations may be considered defensively.
In the United States, where federal registration of cannabis trademarks is not permitted, there are 3,000 active trademark applications pending with the word “cannabis” in the statement of goods and services, over 1,000 with the word “marijuana”, and over 7,000 with the word “hemp”, presumably from trademark owners waiting for a change in the law. In U.S. states where cannabis sales are legal, it may be possible to register a trademark for use in that state by means of a state trademark registration, but in that state only. However, state registrations have much less strength than federal registrations, and often only reflect any common law (use-based) rights that may exist in that state. However, such registrations do provide a claim of trademark rights which will be shown on search reports, and may give easier access to state courts in certain instances.
- Indirect Registration
Another common tool to protect cannabis trademarks at the moment is indirect registration, i.e., registration on ancillary goods and services which do not mention the words “cannabis”, “marijuana”, “hemp”, and related words. Such registrations might cover medicinal foods and substances in Class 5, natural plants in Class 31, and tobacco substitutes and smokers’ articles in Class 34, as well as other products and services related to the industry, for example, publications in Class 16, backpacks in Class 18, clothing in Class 25, novelty message buttons in Class 26, or medical services in Class 44. While not providing direct protection for the goods and services of interest, they are useful as “defensive” registrations. There are several problems which such a path, however. There may be issues as to whether the trademark owner has a bona fide intention to use the trademark on these goods or services, whether there is any actual use of the trademark on these goods when it is time to satisfy use requirements, and when related goods and services terms are too vague to actual protect the goods and services at all.
- Use / Common Law Rights
A common mistake in current analyses of this subject is the role of common law rights, both in claiming common law trademark infringement, but also in unfair competition, deceptive trade practices, and related causes of action. In countries where cannabis trademark registration is prohibited, there is always the possibility that residual common law rights exist and establish some framework for protection.
- Other IP Rights (Domain Names, Copyright, Trade Names)
- General Issues
As with all intellectual property (“IP”) rights, such rights exist in parallel, and are not mutually exclusive. Thus, a new trademark logo or packaging may be protected under trademark law and copyright law simultaneously. Moreover, cannabis trademarks may be registered as domain names and protected as trade names or business names (See Paris Convention, Article 8) to the extent legally permissible.
As the world continues to expand its recognition of the legitimacy of the cannabis industry, more countries will move from indirect to direct protection for these trademarks, including registration. The issues of which marks can be registered, which marks can be used, and which marks can be enforced, will become clearer as the law throughout the world begins to conform to commercial reality.
Clark focuses his practice on trademark, copyright, domain name, licensing, and anti-counterfeiting matters, both in the United States and internationally. He has more than two decades of experience in all aspects of international trademark and copyright laws, including conflict and litigation cases, acquisitions and divestitures involving due diligence for intellectual property assets, licensing and franchising, enforcement actions, and global portfolio management. As part of his sophisticated international practice, he has worked with local counsel in more than 200 countries and coordinated litigation in the United States and abroad. His clients include multinational corporations, startup companies, Fortune 200 companies, and household names.